Mumbai, Mar 20 (PTI) Vodafone India and Idea Cellular
today agreed to merge their operations to create the country's
largest mobile phone operator worth more than USD 23 billion
with a 35 per cent market share.

This means the combined entity of Vodafone and Idea
Cellular, which are India's number 2 and 3 mobile players,
respectively, will overtake Bharti Airtel in a bid to tackle a
raging price war in the world's second-largest market.

The British firm will own 45.1 per cent of the merged
entity while the Aditya Birla group, Idea's parent company,
will own 26 per cent after paying Rs 3,874 crore cash for a
4.9 per cent stake, the two firms announced at a press
conference here.

The remaining 28.9 per cent will be held by other
shareholders.

The new company, which will come into being over the next
two years, will be headed by Kumar Mangalam Birla while
Vodafone will have the right to appoint chief financial
officer.

The CEO and the chief operating officer will be appointed
with approval of both companies. The two firms will have three
nominees each on the board of the new entity.

Aditya Birla and Vodafone eventually aim to own an equal
share of the joint venture.

The merger excludes Vodafone's 42 per cent stake in Indus
Towers and will be effected through issuing new shares in Idea
to Vodafone, which will result in Vodafone deconsolidating
Vodafone India.

This is the second merger in the sector in as many
months. Last month, Bharti Airtel announced plans to buy the
Indian business of the Norway-based Telenor.

The merged venture will create India's largest mobile
operator with almost 400 million users and a 35 per cent
market share by customers. The deal gives Vodafone India an
implied enterprise value of Rs 82,800 crore and Idea an
enterprise value of Rs 72,200 crore.

Vittorio Colao, CEO of Vodafone, the world's
second-biggest mobile operator by subscribers, said the two
companies will continue to operate under their current brands
indefinitely, but will eventually work under the same name.

He did not expect major regulatory hurdles to the deal as
he ruled out any chance of the lingering tax dispute with the
government to affect the merger process.

Idea Cellular fell 7.9 per cent to Rs 99.50 after surging
as much as 14.5 per cent. .